HUDCO Tax Free Bonds

HUDCO is a fully owned Govt company that has a 41 year track record. It is engaged in promoting housing and urban infrastructure projects pan India.
Tax Free, Secured, Redeemable and Non-Convertible Bonds @ 8.10% to 8.35% p.a depending on your category and term. The security is provided by way of floating first pari-passu charge on present and future receivables of the company, to the extent mobilised under this issue.
Unlike the IRFC, NRI's CANNOT apply, nor minors or foreigners. Applications are still being accepted, but could close on Monday, 30th Jan for HNI's!

Here are some thoughts and information that may help you make choices:



The Pro's

• As mentioned in the IRFC post earlier, public consensus and the RBI Governor seem to indicate that interest rates seem to be at a peak. This gives you a chance to lock them in. HNI's who take the 10 year option, the pre-tax return is 11.72%, Retails investors 11.90 % and Corporates 12%!
• In the event that interest rates fall over the next 10 years, potential to make capital gains!
• After one year, the tax liablility on your gain would be 10% unless the DTC determines otherwise. Indexation will also apply for those who can make use of it!
• No wealth tax.
• If you put in a tidy sum of money, the cash flow will feel good. These sort of products are great for those who are close to retirement, or want to be sure of a cash flow every year especially if in the 30% tax bracket.

The Con's

• You will be blocking your money for a serious amount of time. If you need the money during this period, it may not be easy to dispose these bonds.
• If you do have a 10 year horizon, equity could possibly give you a substantially better return.
• Naturally all the caveats on risk over such a long period apply.
• Like in the IRFC issue, if you sell  your bonds, the new buyer will not get the same coupon rate of interest. This is a bit of dampener. The bonds are expected to trade on both the BSE and NSE.
• HUDCO's credit rating is lower than that of IRFC.

The Nitty Gritty

• Issue Opening Date: 27th January 2012
• Issue Closing Date: 06th February 2012 Unless over-subscribed.

Credit Rating:
CARE AA+
FITCH  AA+ indicating outlook on national long-term rating is stable.
Allotment Basis: First-come-First-serve basis.

Three Categories Allocation.

Category I    - QIB's   - 45% allocation

Category II  - Resident Indian individuals, HUF's applying for more than Rs 5 lakh - 25% allocation

Category III -  Resident Indian individuals, HUF's applying for less than Rs. 5 lacs) - 30% allocation

Tax Free Rate of Interest

• For investments below Rs. 5 lacs, 8.22% p.a.  for 10 yrs, 8.35% p.a.  for 15yrs. Minimum application amount is Rs. 10000/- 
• For investments above Rs 5 lacs, 8.10%p.a.for 10yrs, 8.20% p.a. for 15yrs

REQUIRED DOCUMENTS:

To apply in Demat (Electronic) form:

• Cheque OR Demand Draft.
• PAN Card copy (self attested)
• Cancelled Cheque

B. To apply in Physical form:

1. Cheque or Demand Draft (DD)
2. PAN Card copy (self attested)
3. Cancelled Cheque
4. Self attested Copy of Address Proof: ration card OR passport copy OR recent bank statement OR recent passbook OR recent telephone bill OR driving license OR home rental/sale agreement.
5. Life Insurance Policy.

Cheque to be made in favour of : "HUDCO Tax Free Bonds – Escrow Account ”

Psst: If you need forms, can do. Just email us @ mfschemes@gmail.com with a copy to skabraji@gmail.com.
We will earn, if you invest via us! Thanks!